CIT Finds Importer Liable and is Penalized for Misclassification

The Court of International Trade (CIT) has determined that an importer – Horizon Products International – is liable for a negligence penalty in a case involving misclassified imports.

The case involves various types of plywood that were entered or attempted to be entered under incorrect duty-free tariff subheadings. CBP previously demanded payment of $120,254 in outstanding duties as well as a penalty of $324,540 for negligence. CBP received $50,000 from the importer’s surety and in 2015 the CIT ordered the importer to pay the remaining $70,254 in duties owed after the importer admitted to the misclassification.

On the decision of negligence penalty, the CIT waited because there was a genuine factual issue as to whether the importer exercised reasonable care. The importer claimed it made the entries using an authorized customs broker but the court said it appeared that the importer had instructed its broker to use one of the inapplicable classifications with respect to at least some of the entries, even after CBP advised it of the correct classification.

Now, the CIT states that there is no evidence as to any steps taken by the importer or its broker to ascertain the correct classification and that the importer failed to demonstrate that it made a good faith effort to assert the correct classification at entry. In addition, the importer disregarded information on invoices that contradicted its description of the goods on the entries. As a result, the court states, the record lacks any evidence to suggest a reason for the importer’s actions other than an unlawful effort to obtain duty-free treatment.

However, the CIT declined to impose the statutory maximum penalty for negligence, instead setting the amount at $162,270.